Could 2011 graduate recruitment suffer after disappointing third quarter?
Let's face it, the third quarter wasn't a good one for investment banking. Of the firms that have reported so far, net income is down an average of 32%.
It's slightly surprising, therefore, to see that headcount has been on the up during this period. Credit Suisse, for example, added 600 people in its investment bank in Q3 while Goldman increased staff numbers by 4%.
The culprit, though, is obvious - campus recruitment. Brady Dougan, Credit Suisse's CEO said that the "largest component" of headcount increase in Q3 was down to graduate hiring, while David Viniar, CFO at Goldman said that "probably 80%" of the rise was because of the annual analyst intake.
Taking on graduates is relatively cheap. Nonetheless, questions are still being asked about the wisdom of increasing staff costs in the face of slumping revenues.
The question is, therefore, at this point in the year - when most banks are gearing up for next year's graduate recruitment - whether these overriding negative business conditions will lead to headcount targets for graduate hires in 2011 being adjusted downwards.
After all, the precedent is there - albeit under the much bleaker scenario of September 2008, when most banks rapidly scaled back graduate recruitment for 2009.
Neither Credit Suisse nor Goldman would comment on whether the EMEA target of 275 and c300 graduates destined to join in 2011 respectively would shrink.
The good news is that the situation is clearly nowhere near as apocalyptic as 2008. And it's not yet apparent whether the latest results are a blip or a slump. Therefore, any reduction in graduate numbers seems unlikely, suggest recruiters.
"Most banks have taken a conservative approach to graduate recruitment in 2011, as there was no macro-economic trend to suggest they should drastically increase numbers," says Malcolm Horton, global head of recruiting and programmes at Nomura. "Most banks have likely already offered 60-70% of places to internship conversions, so while there's potential to be flexible with headcount targets, it would probably only be 40% of the total intake at the most."
There's also the fact that the majority of internship conversions have been for roles in the front office. By curtailing campus recruitment, banks would have to stem the flow of graduates coming into areas like operations and technology.
"By cutting back targets now, we'd have to rescind offers made to interns, and that's not going to happen," insists another head of recruitment at a bulge bracket investment bank. "It would also be very short-sighted of us to pull back from campus recruitment."
